Tax Facts

3656 / How much may an individual contribute to a traditional IRA? How much may be deducted?

Contributions to traditional IRAs are limited at two levels. First, there is a limit on the amount of contributions that may be deducted for income tax purposes. Second, there is a limit with respect to the amount of total contributions that can be made, including both deductible and nondeductible contributions.

Contributions to an individual retirement plan are not subject to the general limits on contributions and benefits of IRC Section 415 ( Q 3868). (See Q 3701 for the effect of IRC Section 415 on simplified employee pensions.) The source of the funds contributed to an IRA is not determinative as to eligibility or deductibility so long as the contributing individual has includable compensation at least equal to the amount of the contribution.1

The IRA contribution limit does not apply to qualified rollovers into an IRA.2

Deductible Contributions

If an eligible individual contributes on his own behalf to a traditional IRA, he generally may deduct amounts contributed in cash up to the lesser of the “deductible amount” for the taxable year or 100 percent of compensation includable in his gross income for such year.3

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